Weekly Factor Returns

A look at what factors influenced the market last week

Equities had a strong week. The Russell 1000 gained 5.31% and the Russell 2000 gained 4.51%. This was the third week out of the previous four where both indices were positive.

Volatility was the driving factor. Several spreads exceeded normal expectations.

Stocks with the most Volatility outperformed those with the least Volatility by 4.90% in the large cap index and by 5.94% among small caps. Both Volatility spreads were greater than one standard deviation above average.

Value was out of favor last week. Stocks with the most attractive valuations underperformed those with the least attractive valuations. The Value spread was -1.47% in the Russell 1000 and -3.30% in the Russell 2000. The small cap Value spread was greater than one standard deviation below average.

Medium-term momentum (MTM) reversed in each index. Stocks that had outperformed the most over the previous six months tended to underperform last week. Short-term momentum (STM) experienced divergent returns. Recent winners continued to outperform in the Russell 1000, but reversed in the Russell 2000.

Size had mixed results. The largest stocks narrowly outperformed the smallest in the large cap index. The smallest decile of stocks outperformed the largest ten percent by 2.38% within the small cap index. The small cap Size spread was one standard deviation below average.

In this series, we highlight several factors’ returns along with the broad index. These are factors – or stock characteristics – we monitor closely. Factor returns equal the difference in the average return of the highest ranked 10% (decile 1) of stocks minus the lowest ranked 10% (decile 10) within each metric. Returns are based on stocks that pass our screen for liquidity, price, and analyst coverage; therefore, some index constitutes are excluded (except for index return). Ranks are sector neutral and equal weight. Stocks are ranked one week before the return period date, with returns calculated for the following week.

Read factor explanations here.